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CHAPTER 1 INTRODUCTION TO COST MANAGEMENT QUESTIONS FOR WRITING AND DISCUSSION 1. Cost management is concerned with assign- ing costs and using information for planning, controlling, continuous improvement, and decision making. It encompasses cost ac- counting and management accounting but has a broader focus than the usual roles as- signed to cost accounting and management accounting. Cost accounting is concerned with assigning costs to various cost objects such as products, services, and activities. Cost management broadens this focus by emphasizing accuracy of assignments based on causal relationships. Manage- ment accounting is concerned with planning, controlling, and decision making. Cost man- agement broadens this focus by emphasiz- ing continuous improvement and expanding planning, control, and decision making to in- clude such factors as processes, value chain, life cycle analyses, strategic consider- ations, and environmental costs. 2. Cost management differs from financial ac- counting in the following major ways: (1) an internal focus, (2) an emphasis on the fu- ture, (3) freedom from GAAP and other mandatory rules, (4) a multidisciplinary scope, (5) an evaluation of individual seg- ments within the firm, and (6) the provision of more detailed information. 3. Factors affecting the focus and practice of cost management are global competition, service industry growth, advances in inform- ation technology, advances in the manufac- turing environment, customer orientation, new product development, total quality man- agement, time as a competitive factor, and efficiency. Global competition means that companies are now competing with the best of the best. Accurate, timely, and relevant accounting data are crucial in appropriately managing costs. Service industry growth has led to the need for increased manage- ment accounting information to improve pro- ductivity and quality. The advances in in- formation technology have led to the cre- ation of integrated relational databases that allow a variety of users to develop their own reports based on their particular needs. It has also fostered the implementation and use of more sophisticated accounting systems such as activity-based costing. Customer orientation, new product develop- ment, total quality management, time as a competitive factor, and efficiency require the accountant to create and track financial and nonfinancial measures of customer satisfac- tion, quality improvement, responsiveness, cycle time, target costs, cost, and productiv- ity. Advances in the manufacturing environ- ment are characterized by practices such as the theory of constraints, just-in-time, and automation. These changes are affecting such practices as inventory management and product costing. 4. A flexible manufacturing system is a compu- terized system that allows different product lines to be manufactured on the same equipment. The equipment can be recon- figured simply by calling up different pro- grams.
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This note was uploaded on 01/31/2009 for the course ACCOUNTING ACCT 470 taught by Professor Professorrajkiani during the Spring '08 term at California State University , Monterey Bay.

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